Life Insurance Trusts

It is important to use a separate trust that is specifically designed to own a life insurance policy. By using a Life Insurance Trust, family members can be provided with liquidity at death that may be needed to pay debts and expenses, taxes, or any other cash need. This limits the need for a “fire-sale” of a decedent’s assets to meet the estate’s obligations in time.

Most importantly, a properly structured Life Insurance Trust will keep the policy proceeds out of the taxable estate for estate tax purposes. A life insurance policy owned individually will be included in the taxable estate.